In the Autumn Statement 2013, Chancellor George Osborne announced a cap on business rate rises.
Following intense pressure from many sources, not least from struggling high street retailers, large and small, the chancellor is to cap business rate rises in England and Wales at 2%, as opposed to the current method of index linking based on periodic revaluations.
The rates were set to rise by 3.2% next April based on last September’s Retail Price Index figure for inflation.
Announcing a £1,000 per year discount for two years on business rate bills for all those small businesses operating from premises with rateable values of under £50,000, he also said that from next April businesses will be allowed to pay their rates in 12 monthly instalments, rather than the current 10.
The Chancellor further announced an extension for another year of a scheme which gives small firms relief from rates liability altogether.
The Chancellor, in recognition of the glut of empty properties blighting many high streets, and to encourage new start-ups, has said he will introduce a new “reoccupation relief”, a measure that will halve the rates for new business occupiers in vacant premises.
The chancellor predicted that the cap on Business Rates could save businesses up to £3,375.
Despite the concessions the Chancellor made no mention of an immediate root and branch review of the business rating systems, something many retailers, investors and industry groups have been calling for, for some time. However, he did say that the Government would be looking to reform the business rating system for 2017.
Business rates are seen by many struggling retailers as a crippling burden and the main reason for many business failures in the face of increasing competition from on-line sales and out of town shopping.
Not just retailers but also manufacturers are citing business rates as a major deterrent to expansion, employment and new investment.
Landlords of commercial properties have been particularly hard hit since full empty business rates fall on the landlord once a business tenant fails and the landlord takes over the property again.
Thousands of vacant units are placing a crippling burden on property companies and landlords, to such an extent that some commercial properties are being demolished.
In Scotland the business rating system is different to England and Wales and recently Scottish local authorities have been allowed to vary business rate liabilities through relief packages which aim to reflect local needs.
Commenting on the Chancellors’ announcement in their media release, Ian Cheshire, British Retail Consortium (BRC) Chairman and Kingfisher Group Chief Executive, said:
“We welcome this two per cent cap on business rates and the announcement on reform of the system with open arms. Immediately this will boost confidence in the sector, and help retailers keep prices low. It will safeguard 7500 retail jobs next year, as well as supporting local communities by keeping more shops open. But this is about more than just a one year reprieve; this is an important first step towards a comprehensive reform of the rates system.”
The BRC’s Director General outlined what is required next for business rates reform. Helen Dickinson, British Retail Consortium Director General, has said:
“The Chancellor has recognised that businesses are suffering and is right to listen to retailers’ concerns on business rates. The BRC has campaigned for a two per cent cap, and reform of the business rates system, and it is extremely welcome to hear it announced.
“The Chancellor has recognised the consensus that exists that the business rates system should be reviewed. The BRC is already conducting a detailed study into options to improve the business rates system with tax experts EY and look forward to playing a full part in the discussions that will take place with Government on the reform of the system.”
“With the additional measures also announced today on National Insurance, retailers will be encouraged to do even more to support the aspirations of young people across the country. 40 per cent of all jobs for those under 20 are in retail, and this will help retailers provide secure career opportunities for young people.”
Read the Chancellor’s speech here: http://goo.gl/OIdokP
The full text of the Autumn Statement Report is here: http://goo.gl/Nw7txk